OptimizeRx(OPRX) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1: Financial Statements This section presents OptimizeRx Corporation's unaudited condensed consolidated financial statements and accompanying notes for the periods ended June 30, 2025 Condensed Consolidated Balance Sheets Total assets decreased slightly to $169.3 million as of June 30, 2025, while total liabilities decreased and stockholders' equity increased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $54,080 | $53,971 | | Cash and cash equivalents | $16,585 | $13,380 | | Accounts receivable, net | $33,512 | $38,212 | | Total Assets | $169,265 | $171,168 | | Total Current Liabilities | $21,057 | $18,654 | | Long-term debt, net | $25,127 | $30,816 | | Total Liabilities | $49,981 | $54,170 | | Total Stockholders' Equity | $119,284 | $116,998 | Condensed Consolidated Statements of Operations Net revenue increased significantly in Q2 2025, leading to a $1.5 million net income compared to a prior-year loss, with six-month net loss narrowing Statements of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $29,195 | $18,812 | $51,123 | $38,502 | | Gross Profit | $18,635 | $11,704 | $31,979 | $23,907 | | Income (Loss) from Operations | $3,189 | $(3,749) | $1,075 | $(8,778) | | Net Income (Loss) | $1,532 | $(4,008) | $(667) | $(10,908) | | Diluted EPS | $0.08 | $(0.22) | $(0.04) | $(0.60) | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly improved to $8.4 million for the six months ended June 30, 2025, increasing cash and cash equivalents Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $8,425 | $2,900 | | Net Cash Used in Investing Activities | $(128) | $(238) | | Net Cash Used in Financing Activities | $(5,092) | $(1,555) | | Net Increase in Cash | $3,205 | $1,107 | | Cash and Cash Equivalents - End of Period | $16,585 | $14,959 | Notes to Condensed Consolidated Financial Statements These notes detail the company's business, accounting policies, term loan, revenue recognition, stock-based compensation, and future payment commitments - The company operates as a single reportable segment, connecting life science companies with healthcare providers (HCPs) and patients through its technology platform[23][27] - As of June 30, 2025, the company had a term loan with an outstanding principal of $29.3 million, bearing interest at 13.1% and was in compliance with all financial covenants[39][45][47] - Revenue is primarily generated from content delivery activities and data subscriptions, recognized over time as services are performed, with $6.3 million recognized as an agent on a net basis for the first six months of 2025[69][75][77] - The company has commitments for future minimum payments to partners totaling $13.1 million, with $7.6 million due in the remainder of 2025[95] Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting strong revenue growth, improved profitability, key performance indicators, and sufficient liquidity for the next twelve months Overview and Strategy OptimizeRx, a digital healthcare technology company, employs a 'land and expand' strategy focusing on enterprise engagements and AI-powered solutions to drive growth - The company's core business is connecting life science organizations with over two million HCPs and their patients via an intelligent technology platform[106] - The strategy focuses on a "land and expand" model, aiming for enterprise-level engagements and promoting higher-margin, proprietary solutions like the AI-powered Dynamic Audience Activation Platform (DAAP)[108][109] Key Performance Indicators Key performance indicators show increased average revenue per top 20 pharma manufacturer and improved revenue per employee, alongside strong net revenue retention Key Performance Indicators (Rolling Twelve Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Average revenue per top 20 pharma manufacturer (in thousands) | $3,082 | $2,753 | | % of total revenue from top 20 pharma manufacturers | 59% | 66% | | Net revenue retention | 121% | 124% | | Revenue per average full-time employee (in thousands) | $767 | $658 | Results of Operations Net revenue grew 55% in Q2 2025, improving gross margin and leading to a $1.5 million net income, primarily due to reduced stock-based compensation - Net revenue increased 55% to $29.2 million for Q2 2025 and 33% to $51.1 million for the six months ended June 30, 2025, driven by growth in DTC and DAAP related sales[121] - Gross margin improved to 63.8% in Q2 2025 from 62.2% in Q2 2024, attributed to a better product and channel partner mix[124] - Stock-based compensation expense decreased significantly to $1.5 million in Q2 2025 from $2.9 million in Q2 2024, mainly due to lower grant date fair values and forfeiture of prior CEO's awards[126] Liquidity and Capital Resources The company maintains strong liquidity with $33.0 million in working capital and expects existing cash and operations to fund obligations for the next twelve months - The company had working capital of $33.0 million and cash of $16.6 million as of June 30, 2025[134] - Management believes existing cash and funds from operations are sufficient to finance operations and meet obligations for the next 12 months[135] - Net cash from operating activities for the first six months of 2025 was $8.4 million, a significant increase from $2.9 million in the same period of 2024[137] Item 4: Controls and Procedures Disclosure controls and procedures were deemed ineffective due to an un-remediated material weakness concerning third-party data completeness and accuracy, with remediation efforts ongoing - Management concluded that disclosure controls and procedures were not effective as of the end of the period covered by the report[147] - The ineffectiveness is due to a previously identified material weakness related to controls over the completeness and accuracy of data received from third-party service organizations[147][149] - Remediation efforts are underway, including requiring SOC-1, Type 2 audit reports from third parties, hiring a Senior VP of Internal Controls, and developing a new audit process; the material weakness will be considered remediated once new controls are tested and proven effective over time[150][152][153] PART II — OTHER INFORMATION Item 1: Legal Proceedings The company is not currently a party to any material legal or administrative proceedings, nor is it aware of any threatened actions - The company is not currently a party to any material legal proceedings[159] Item 1A: Risk Factors No material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K have occurred - No material changes in risk factors have occurred since the filing of the 2024 Annual Report on Form 10-K[160] Item 5: Other Information This section discloses the adoption of Rule 10b5-1 trading plans by executives and the approval of amended bylaws with new stockholder procedural requirements - During Q2 2025, director Patrick Spangler and CFO/COO Edward Stelmakh adopted Rule 10b5-1 trading plans for the sale of company securities[163][164] - On August 5, 2025, the Board approved the Fourth Amended and Restated Bylaws, which established new and more detailed procedural requirements for stockholder nominations and business proposals[166][167]